Asianet Digital Network Pvt Ltd vs Union of India

Heard Sri V Lakshmikumaran, learned Counsel for the petitioner, and Sri N Venkataraman, learned Additional Solicitor General of India, and Sri P R Sreejith, learned Senior Standing Counsel for the Central Board of Indirect Taxes and Customs (CBIC) on behalf of the respondents. These two writ petitions have been filed by the petitioner, Asianet Digital Network Private Ltd, a company registered under the provisions of the Companies Act, impugning two show cause notices in Ext.P1 in both the writ petitions issued under Section 73 of the Central Goods and Services Tax Act 2017 (CGST Act) for the period February 2017 to June 2017 in W.P.(C) No.30147/2022 and from July 2017 to March 2020 in W.P.(C) No.3611/2024. In October 2015, Asianet Broadband Private Ltd was formed as a wholly owned subsidiary of Asianet Satellite Communications Ltd (Parent Company). Asianet Broadband Private Ltd was renamed Asianet Digital Cable TV Private Ltd in March 2017 and again renamed Asianet Digital Network Private Ltd in January 2018. During the initial period, from 1993 to 2000, the Parent Company provided cable television services directly to subscribers. The Parent Company received different channels broadcasted by various broadcasting entities and provided access to such channels to its subscribers on payment of subscription charges. This system of providing signals directly to subscribers is known as Multi-System Operator (MSO). In areas where the Parent Company did not have network coverage, it provided input services to Local Cable Operators (LCOs), who, in turn, re-transmitted the signal of various channels to their subscribers. The cable operator service was brought under the Service Tax net in 2002. According to the petitioner, the Parent Company had been paying service tax at applicable rates on the amounts received as consideration for services provided to subscribers and LCOs. It is said that during the period from April 2015 to June 2017, the Parent Company was providing services to around 1200 LCOs in addition to their direct subscribers. Until 2015, cable television signals could be received by subscribers through either analog or digital systems. However, from 01.02.2017, in pursuance of the implementation of Digital Addressable Systems by the Government, vide the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations 2012 (DAS Regulations) and the Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations 2017 (2017 Regulations), cable television signals were provided only through a digital system, i.e., through set-top boxes.

The petitioner is registered as a Multi-System Operator (MSO) with the Ministry of Information and Broadcasting and is engaged in providing digital cable television services to subscribers under the brand name ‘Asianet’ throughout Kerala. They are registered for service tax and have been paying service tax on monthly subscription amounts collected from their subscribers for digital cable television services, as well as for other services rendered, such as broadcasting services and maintenance or repair services. An intelligence enquiry conducted by officers of the Directorate General of Goods and Services Tax Intelligence (DGGI), Thiruvananthapuram Regional Unit, indicated that various Local Cable Operators (LCOs) linked to Asianet were collecting payments from subscribers. After retaining part of the amount collected from the subscribers, the LCOs would remit the remaining amount to the petitioner. The petitioner was not accounting for the amounts retained by its linked LCOs in their financial documents and was thus suppressing taxable value and service tax liability. According to TRAI regulations under the Digital Addressable System (DAS) regime, the ‘service provider’-‘service recipient’ relationship in respect of digital cable TV services is between Asianet, an MSO, and the subscriber only, with the LCO having no direct role in the supply of service to the subscriber. The DAS has been implemented since 01.02.2017. The petitioner provided data on the amounts raised on LCOs, i.e., the revenue share of the MSO for the period from February 2017 to June 2017. However, billing data of LCO-linked subscribers were not available for the said period. In the absence of billing data of LCO-linked subscribers, the provisions of Section 70 of the Finance Act 1994 have been invoked against the petitioner. After synchronizing the response to the summons issued to the petitioner and considering the submissions of their representative and the relevant rules and regulations, the authorities have formed a considered opinion.

The authorities have formed a considered opinion on several key points. They determined that the entire amount collected as subscription charges from LCO-linked subscribers is the consideration for the services rendered by the MSO to those subscribers, and the amount retained by the LCOs is the consideration for the services rendered by the LCOs to the MSO. The petitioner failed to account for the amount retained by its linked LCOs in its books of account, thereby suppressing taxable value and tax liability for the period from February 2017 to June 2017. Additionally, the petitioner did not correctly assess their service tax liability for that period and suppressed the value of taxable services in their ST-3 returns filed for the same period. The petitioner provided digital cable TV services with the assistance of LCOs linked to Asianet, collecting amounts monthly from subscribers through these LCOs. In return for the services provided by the LCOs to Asianet, the LCOs retained a portion of the total collected amount based on the number of active Set-Top Boxes (STBs) and the channel packages running on the STBs of subscribers linked to the LCOs. The authorities also found that the petitioner had not issued an invoice for the entire amount collected as monthly subscription charges from LCO-linked subscribers or for the amount retained by the LCOs. The petitioner did not account for the amount retained by its linked LCOs in its books of account, thus suppressing taxable value and tax liability for the period from July 2017 to March 2020, and had not correctly assessed their GST liability for that period.